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Jay Clayton, chairman of the U.S. Securities and Exchange Commission, praised state-level regulators across the United States and Canada for cracking down on cryptocurrency fraud through their joint task force — “Operation Crypto Sweep.”

“I applaud our fellow regulators in the United States and Canada who are coordinating and participating in efforts to police fraud in the Initial Coin Offering (ICO) markets,” Clayton remarked in a statement released May 22. “These state and provincial regulators play a critical role in protecting Main Street investors.”

He added:

“The enforcement actions being announced by NASAA should be a strong warning to would-be fraudsters in this space that many sets of eyes are watching, and that regulators are coordinating on an international level to take strong actions to deter and stop fraud.”

‘Many Eyes Are Watching’

Operation Crypto Sweep was launched in April 2018 under the oversight of the North American Securities Administrators Association (NASAA), as CCN has reported.

In just the past month, the operation has launched 70 investigations into potential cryptocurrency scams and fraudulent ICOs in 40 jurisdictions across the United States and Canada.

NASAA president Joseph P. Borg said the task force has sent numerous cease-and-desist letters to potential scam artists and promised that more enforcement actions will be forthcoming. “The actions announced today are just the tip of the iceberg,” he vowed.

SEC Chairman Jay Clayton | Source: YouTube

In his statement praising the initiative, Clayton said that when securities are sold through ICOs, state and federal securities laws apply to the underlying assets. Clayton said cryptocurrency market participants who ignore securities laws will be prosecuted if they con unwitting investors out of their hard-earned money.

“Unfortunately, some market participants seem to believe that the use of new technology provides a basis for ignoring the core principles of our securities laws,” Clayton said. “But there is absolutely no case for abandoning our core principles.”

SEC Launches Fake ICO Website As Teaching Tool

Clayton then discussed the fake ICO website the SEC launched to educate investors on how to avoid ICO scams. The website for the bogus HoweyCoins ICO has its own white paper, customer testimonials, and bogus celebrity endorsements.

“The offering is not real. It is a fake,” Clayton explained. “But it does illustrate the common ‘red flags’ of fraud in the ICO markets and how little work it takes to engage in such a fraud.”

In April 2018, Clayton said contrary to speculation, the SEC does not believe that all initial coin offerings are fraudulent. “Absolutely not,” he said.

Clayton explained that eradicating fraud in the virtual currency markets is necessary to protect consumers and underscored that regulatory scrutiny will actually benefit the industry by ridding it of the fraudsters and scam artists who give the entire space a bad name.

Weeding Out Scammers Benefits Everyone

Driving out bad actors early on will ensure that the government won’t eventually adopt such a hard-line stance that it will choke off the burgeoning industry, Clayton explained.

“If we don’t stop the fraudsters, there is a serious risk that the regulatory pendulum – the regulatory actions – will be so severe that they will restrict the capacity of this new security,” he said.

Jay Clayton echoed the sentiments of bitcoin bulls the Winklevoss twins, Tyler and Cameron, who welcome regulatory oversight, as CCN has reported.

“My complaint would be that regulators haven’t moved quick enough to make clear frameworks and paths forward for legitimate operators,” said Tyler Winklevoss, the CEO of Gemini. “As long as jurisdictions strike the right balance, we think that it’s going to be a huge boon and win for cryptocurrencies.”

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Samantha Chang is a politics writer at BizPac Review and a financial editor. She is a law school graduate and an alum of the University of Pennsylvania. You can follow her on Twitter @Samantha_Chang. Read more of her CCN cryptocurrency articles here.